Friday, June 29, 2007

Trust allows a team to move fast and make more money. It’s a simple but true fact so often neglected inside companies. It comes down to two simple issues that are an advantage in a culture of trust and a huge liability in a culture of politics and mistrust:1) how long it takes to make a decision and2) the quality of the decision.

Consider annual (or in the case of a startup often quarterly) financial planning. It’s classic. Jim executive asks for a 20% increase in headcount even though he knows he only needs 15% but he’s planning a) to negotiate hard with the finance department so he ends up with 15%, or b) position himself as a hero when he reluctantly agrees to “manage” with 15% although it will (sigh!) be hard on his team, or c) any number of other politically motivated behaviors. I’ve seen this game too many times as an executive of large companies.

But consider, in contrast, the management team that operates on trust as a basic principle in financial planning. The dynamic is quite different. Sally executive makes a case for the 15% increase that is really needed. She explains the background but also listens carefully to the other execs needs so she can be part of the total decision on how to allocate dollars for the next period. Her peers know that if she says she needs 15% then it is 15% and if she can only get 10% then the scope is going to have to change. Everyone sees all the budgets and goals – total transparency. There’s no negotiation – just open discussion on the requirements of the business. There’s no false heroics, again because of the transparency.

And as a result, the decision takes less time and is a higher quality decision for the business.

We are growing fast at FirstRain now and so another incredibly important decision we have to make frequently is hiring, especially hiring senior talent. One of our values is “Demand uncompromising quality” and I have been known to tack “in our people” on the end of the sentence. Hiring is the single highest leverage point on quality (more on that in a later post). So, the hiring decision needs to be open, transparent and filled with honest assessment. That only happens if the hiring team trusts each other.

We have a hiring process that counts on trust. The hiring manager assigns an interviewing team, everyone meets the candidate and then the team assembles for a “round table”. At the round table everyone is required to express their opinions is an open, constructive way, but all input is OK, both good and bad. The process moves fast and gets to good results because there is trust that the hiring manager truly wants the team’s input, and that the team is honestly trying to get to the best decision. Without trust you see posturing, cronyism and manipulation of the process. I’ve worked in companies where senior executives bring in friends with no interviewing process whatsoever. Now that’s a recipe for others to trust – not!

Running a young, growing company we make hundreds of decisions a day. We won’t get them all right but we need to get the majority right, and to make them in little to no time.

In a nutshell, trust allows a team to identify problems without baggage. My COO, YY Lee, and I have worked together twice before. We’ve fought battles together, watched each other’s backs and developed a deep trust that no matter what’s happening the other’s intentions are good and for our common goal – the success of the company. As is usual with any aggressive technology development plan, s**t happens, features slip, experiments fail. I trust that I am always getting the straight scoop – no baggage, no positioning. It’s incredibly efficient.

My CFO, Luis Buhler, and I built my last company together, took it public together and sold it together. Nuff said. I would stake my career (huh, come to think of it I do…) that our books are clean and that what Luis tells me is exactly what’s in them. Again, incredibly time efficient and our planning conversations move quickly and come to crisp decisions in very few iterations. It’s not that we’re smarter, or better – it’s just that we have a management process, called trust which allows us to move fast.

How to tap into this simple advantage? It takes two critical elements:1. To be trustworthy and demand trustworthy behavior of everyone in the company. That means dealing in the truth and not tolerating politics, ever. Zero tolerance.2. Time. No escaping this one. Time.